The retail gold jewellery sales in India shows a little uptick but overall demand is struggling as the manufacturers and retailers are not operating anywhere near capacity. The global gold demand is dominated by gold jewellery which is about 60% of gold sales. The top three gold markets are China, India, and the United States.
The sales in Hong Kong is low and can be attributed to political uncertainty over Chinese action and pandemic. In the third-largest market, the USA, the sales have declined 40% in the last quarter as reported by the largest retailers. However, the USA market is dependent on the holiday season around November for gold jewellery sales.
Gold jewellery retail, in general, is among the worst affected among the consumer goods during COVID-19 crisis as gold is both a non-essential and a discretionary purchase.
Going forward, as the COVID-19 cases increases in India and the world, the use of face mask and head coverings will result on the decline in gold jewellery sales as it does not perform the role as fashion accessory and status.
Metals Focus, the leading gold industry data keeper has forecasted that 2020 will be the lowest level of global jewellery demand over 30 years.
Gold as an investment
The COVID-19 crisis reinforces the traditional role that the gold plays as a safe haven investment and currently the world is experiencing an increase in demand for gold and gold-backed investment products like the gold ETF. As of today, the price of 10g of 24k gold (99.9%) in Mumbai is Rs 53000.
The gold prices in the USA market has breached the $ 1900/ ounce barrier. The value of gold scaled these highs during the last financial crisis in 2008 in the USA market.
“This time around, the world faces challenges on the health, financial as well as the geopolitical front, thereby pushing the value of gold higher and higher. I think gold will leave behind all previous highs this time around. Investments in gold look positive to bring high returns over a 2 to 3-year timeline. On the other hand, we have seen a sharp rise in prices of Silver as well, crossing all-time highs of INR 60,000/kg,” says Dr Saurabh Gadgil, Chairman and Managing Director, PNG Jewellers.